The Income Tax Act, which was brought into force in 1961, is the statute under which all matters relating to taxation in India are listed. It includes levy, administration, collection as well as recovery of income tax. Section 87A, one of the several sections of the Income Tax Act, was inserted by the Finance Act, 2013, to provide tax relief to individual taxpayers. Rebate under Section 87A provides for lower tax payment from individuals earning below a specified limit.
According to the Income Tax Department, “An individual who is resident in India and whose total income does not exceed Rs. 5,00,000/- is entitled to claim rebate under section 87A. Rebate under section 87A is available in the form of a deduction from the tax liability. Rebate under section 87A will be lower of 100% of income-tax liability or Rs. 12,500. In other words, if the tax liability exceeds Rs. 12,500, rebate will be available to the extent of Rs. 12,500 only and no rebate will be available if the total income (i.e. taxable income) exceeds Rs. 5,00,000/-.”
Important Points of Section 87A of the Income Tax Act, 1961
The following are some of the noteworthy points of Section 87A of the Income Tax Act, 1961:
· The amount of deduction that can be claimed under this section is either 100% of the income tax liability or Rs. 12,500 (whichever is lower).
· The rebate is applicable to total tax prior to adding the educational cess of 4%.
· Only individuals are eligible to avail rebate under this section. Companies, firms or Hindu Undivided Family cannot claim this rebate.
· Rebate benefit is available to senior citizens (individuals above the age of 60 years and below 80 years)
· Super senior citizens (individuals above the age of 80 years) are not eligible for a rebate under Section 87A.
· Only Indian residents are permitted to claim this rebate, NRIs are not allowed rebate under Section 87A.
Claiming Refund under Section 87A of the Income Tax Act, 1961
A rebate under this section is allowed to taxpayers - being a resident individual - whose net total income is below Rs. 5,00,000/-. The rebate available is up to Rs. 12,500 or 100% of the income tax, whichever is lesser. The taxpayer can claim the rebate at the time of filing tax returns, prior to including education cess, secondary and higher education cess.
Eligibility Criteria to get Benefits under Section 87A
For FY 2019-20
An individual is eligible to claim a rebate under Section 87A provided he or she meets the following conditions:
1. The individual must be an Indian resident.
2. His or her total income, fewer deductions under Section 80, has to be below or equal to Rs. 5,00,000/-.
Note - The rebate that can be claimed is limited to Rs.12,500. This means that if the total tax payable is below Rs 12,500/-, that amount will be the rebate under section 87A.
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